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HR Magazine - July 2002: Cover Story: Facing the Future

By Steve Bates  7/1/2002
HR Magazine, July 2002
Vol. 47, No. 7 

Practitioners who master the business skills needed for demanding new roles will take flight as HR undergoes future metamorphosis.

Human resource management is undergoing a massive transformation that will change career paths in as-yet uncertain ways. Employers are placing greater emphasis on business acumen and are automating and outsourcing many administrative functions, which will force many HR professionals to demonstrate new skills and compete for new, sometimes unfamiliar roles.

Job titles and functions will likely remain in flux for some time, say business leaders, academics, HR consultants and HR professionals. But they say that some of the standard niches—such as HR generalist and benefits specialist—will become less common and less important, giving way over time to new ones such as HR financial analyst.

Those who aspire to leadership roles within the profession will have to become more strategic, more proactive, more involved in the overall business of their employer, say the experts.

But there is an upside to this upheaval: HR people who develop business competencies and embrace the new roles—in the process redefining themselves and their profession—can aspire to greater and much more rewarding careers than were possible for HR people a generation ago.

“HR is dead. Long live HR,” says David Ulrich, a professor of business administration at the University of Michigan. That’s his way of saying that “the old HR”—that which emphasizes expertise in transactions and paperwork—“is dying in a sense.”

HR departments will be smaller, says Ulrich. “Some of HR will go away. Some of HR should go away.”

In its place will rise a leaner, refocused cadre of professionals who put the business first and foremost. The most successful HR people will be those who “think from the outside in,” according to Richard Beatty, an HR management professor at Rutgers University and the University of Michigan. “When we talk about being strategic, we mean thinking from the customer back to the organization.”

In this new HR, professionals are expected to know the business well enough to align human capital with business needs, either developing the needed talent or going outside the organization to get it. HR is proactive. HR goes looking for problems to solve. HR doesn’t just have a seat at the table; HR helps set the agenda.

What exactly will be the desirable HR jobs in the next decade and beyond? How does HR get there from here? And how can HR people obtain the education and training they need to secure and keep those jobs?

HR Jobs of the Future
Though the job picture is still developing, experts see several possible critical roles on the horizon for HR professionals. Among them:

  • The CFO for HR. This number cruncher can apply the metrics to demonstrate the inherent economic value of HR and to analyze the cost-effectiveness of various practices HR proposes or implements: How much do certain employees contribute to the bottom line? How much does the right training help the business? Which functions or programs do not add value and should be eliminated?
  • The internal consultant. This person helps spread HR competencies through the organization, empowering line managers to recruit, interview, hire and retain the talent that they need while counseling the managers on crucial legal and ethical matters such as disability and age discrimination laws.
  • The talent manager. This person is responsible for finding, developing and keeping the best and the brightest workers to meet the needs of the organization. He or she will manage learning and succession planning, moving people through the talent pipeline.
  • The vendor manager. He or she determines which functions can be handled better and less expensively outside the organization. This professional monitors quality and costs, stays on top of trends in this business, and maintains a close working relationship with outsourcing firms and other vendors.
  • The self-service leader. This person works with internal and outside information technology specialists to establish and run web-based portals for many automated functions, such as benefits and pension administration, that employees can access from their desktop computers.

In these and other possible HR jobs of the future, HR leaders “have got to create a product at the right price and with certain characteristics that the buyer needs,” says David Rhodes, a principal at consulting firm Towers Perrin. The product is the contribution of the workforce to specific business goals. The buyer is senior management.

Skills for Survival
“People are finally realizing that, to be successful in HR, you need more than HR knowledge,” says Susan Meisinger, SPHR, president and CEO of the Society for Human Resource Management (SHRM). The primary missing link, say Meisinger and other experts, is knowing business and its language.

“Get thee off to business school. Study finance,” says Dave Kieffer, who heads Mercer Human Resource Consulting’s human capital strategy practice. Once considered a bonus for an HR worker, business literacy will be a prerequisite for almost every desirable HR job, says Kieffer.

“There’s a technical skill set and a strategic skill set that you’re going to need to survive,” agrees Rhodes. “You’ve got to be able to put forward a business case as strong as any other put before management.”

“When you don’t do business speak, you’re immediately marginalized,” says Michael J. Lotito, SPHR, a partner in the law firm Jackson Lewis and 2000 board chair of SHRM.

“For HR to make a breakthrough, it has to focus on cost,” says Ed Jensen, an HR expert with the Accenture consulting firm. “If you can impact labor cost, you’ve made a real bottom-line impact.

“You have to say: ‘I’m reducing your business costs. I’m reducing your overtime because I’m scheduling people better.’ There are all kinds of ways you can have a direct cause-and-effect impact, and you can go from there to a bigger, strategic role.”

But Jensen concedes: “It’s a fundamental shift in thinking” from traditional HR roles.

Bonnie Cundiff, an HR expert with consultant Watson Wyatt, agrees. “HR people have to be true believers” that the business comes ahead of advocacy for employees. “You have to be recognized first as a contributor to the business.

“I may not like what I’m saying,” she adds. But the business mindset “is not something that is just needed to win. It’s needed to play” in the new world of HR.

The ultimate goal of this transformation of HR is “the integration of HR becoming good business people and business people becoming good HR people,” says Cundiff. “I won’t say it’s an easy path. I do think it’s an exciting path.”

“You can’t just raise your hand or go to another person in your organization and say: ‘I’m your business partner,’” says Jensen. “You’ve got to bring something to the table.

“There isn’t some magical answer,” he states. “It’s basic stuff. Get smarter about what’s going on around you. Mimic the HR consultants; what kinds of training and reading they do. Go out to lunch with other people in the organization—not just HR people.”

“Everybody should have a line of sight between their goals and those of the business,” says Ulrich. “You have to know finance, market strategy, technology, staffing and training needs, managing change, managing culture. You have to develop credibility.”

In some organizations, “it’s going to be very difficult” persuading top management that you’ve ratcheted up your skills through business education and can take on new responsibilities, says Roger Herman, a business futurist and consultant with the Herman Group in Greensboro, N.C. “The process will take some time, some dedication.”

“There’s going to be a lot of HR people feeling like victims,” says Ed Lawler, an author and director of the Center for Effective Organizations at the Marshall School of Business in Los Angeles. “The world is changing around them.”

Herman says HR professionals need to motivate themselves to keep up with changes in the profession, not waiting for their HR colleagues to join them: “Most of your peers will not do this. You are driving your own career. Do not depend on anyone else to drive your career.”

In many organizations, the future of HR is up for grabs, says Philip D. Simshauser, president of DBM’s Center for Executive Options, which offers executive coaching at several locations. “Fashion it. Create it.”

Outsourcing Explosion
These changes will take place in different ways, and at different rates, in various organizations. However, they are being accelerated by the furious phenomenon of HR outsourcing, which was a roughly $60 billion business in 2001 and could soon top $100 billion per year, say industry insiders. (See “Fishing for Bigger Business” in the April issue of HR Magazine.)

Simply put, the economies of scale allow an outside firm to do most transactional HR functions more cheaply than the organization itself. What started with a trickle in payroll outsourcing during the 1980s and 1990s has become a flood, with some large corporations moving toward “total HR outsourcing” to vendors such as Exult Inc. Exult has signed billions of dollars worth of long-term HR contracts with large multinational corporations and is being challenged by other aggressive outsourcing firms.

“The market is huge. And the market has not been fully understood,” says Rohail Khan, North American COO for the e-peopleserve outsourcing firm. Business outsourcing “is where the Internet was five years ago.”

Outsourcers, and many of their clients, say that the big upside of outsourcing routine HR functions is that it frees HR to do more strategic work within the organization. But taking advantage of that opportunity requires the right background. A master’s degree in business administration is ideal, but an undergraduate business degree or community college courses can help, say the experts. (See “Are Colleges Up to Speed?” on p. 30.)

The goal is to be able to understand financial statements and gain insight about executive compensation issues—the visible, marketable skills of the new HR. “It doesn’t matter how you get there,” says Rhodes of Towers Perrin.

While business knowledge is a significant way to advance the profession and the careers of individual professionals, certification programs can help as well, say many in the HR field. (See “Proof of Competence” on this page.) Many HR professionals, organizations and academics note that current HR professionals and young entrants can gain a competitive edge through certification.

“In a good economy or a bad economy, people look for ways to differentiate themselves,” and one of the best is professional certification, says Cornelia Cont, director of the Human Resource Certification Institute (HRCI), an affiliate of SHRM.

Passing the PHR exam “is definitely a goal of mine,” says Kiyoski “KC” Shinozaki, an HR generalist and assistant manager for accounting and administration with the NIKKEI Japanese business publishing group in New York.

Shinozaki, 30, who needs about one more year of experience to take the exam, says that “having a recognizable certification will go a long way” toward helping him and others who hope to prosper in the new HR.

Shinozaki has a master’s degree in HR management and has been taking accounting and finance courses to help him “translate HR into business.” He says those courses had an additional, unexpected benefit: solid advice from his professors about how to build a career. “One of the lessons I learned is that HR can be reactive or proactive,” he says, and he definitely favors the latter approach. “We need to change our thinking.” 

Michigan professor Ulrich agrees.

“We have to shift the focus of HR away from training and process to the outcomes, away from a people function to an organization function. I’m not optimistic about all HR people” making that transition, he concedes.

Jobs will still be available for many who want to stay roughly where they are today, some experts say.

“HR professionals have to examine their own background and what they are comfortable doing,” says SHRM’s Meisinger. Regardless of whether they aspire to be on the cutting edge of human capital management or to remain in their current niche, “if they don’t execute the basics of HR flawlessly, they won’t succeed.”

‘Visit Your Customer’
In many cases, HR professionals will need to start small in their efforts to demonstrate hands-on competency in business matters. Advises Herman: “Go visit your customer”—the line managers in your organization. “Spend a day shadowing your customer. What kinds of things are they dealing with? How can you help” measure and analyze how well employees are matched with the talent needs of these managers?

“Do this at several levels—front-line supervisors; mid-level supervisors; senior management—even if you’re a fly on the wall. Then get a mentor at that higher level,” suggests Herman. “Find out what they see as the challenges in five years.”

This internal consultant role could be the trickiest. Technology will enable line managers to lessen their dependence on HR departments by handling recruitment, salary reviews, succession planning and other functions at their computers, notes a new report, “2002 SHRM Workplace Forecast: A Strategic Outlook” (available at SHRM Workplace Trends).

But working with line managers who welcome regular collaboration with seasoned HR professionals can be one of the most effective roles for HR in the coming decades, say the experts. That will be particularly true for HR professionals who can master the numbers, the holy grail of HR statistics demonstrating which practices generate profits.

“We are on the cusp of measuring things in human capital and human resources that have never been measured before,” says Mercer’s Kieffer. “People with a strong sense of empirical methods will distinguish themselves,” he says.

“Top executives are going to be turning to HR” to set financial baselines for recruitment, training, turnover and the like—not content to accept benchmarks or best practices from other organizations that might not apply equally in theirs, Kieffer says.

In many organizations, there will be a struggle to update the image of the HR profession and the practitioner. “To change your image, don’t be afraid to take on a challenge,” says attorney Lotito. Eventually, “you’ll be invited to the table,” he says, “and you can demonstrate your value to management once you’re there.”

“HR people need to be very savvy in terms of the relationships they strike up,” says Lynda Ford of the Ford Group, an HR consulting firm in Lee Center, N.Y. “Build internal relationships” not only to learn the business but also to improve your image, she suggests.

“If you can push interviewing and hiring out to the line managers, that’s great,” says Ford. “Where the glory goes is not an issue,” she says, because the line people you help will know the value of your contributions.

HR’s image has been worse than it should be because “some HR people have continued to be bogged down in administration, preventing them from demonstrating the value they can provide,” says Accenture’s Jensen. “Most HR organizations I know are still struggling with that.”

But changing the image of HR does not require that HR abandon its roots, says Ulrich. “We need to quit lamenting our [administrative] heritage. We have a great heritage,” he says. “We need to stop calling for action and just act. We’re going to experiment. We’re going to succeed. We’re going to fail.”

Despite all the growing pains, Ulrich concludes, “The future of HR is phenomenal.”

Steve Bates is senior writer for HR Magazine.

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